Life insurers are today at a critical juncture having to face a 33% fall in penetration in mature markets between 2007 and 2023 with 1 in 2 policyholders stating their experience is ‘underwhelming’, finds the Capgemini Research Institute’s World Life Insurance Report 2025. This situation is further aggravated by high inflation, economic uncertainty and waning interest. “Much of this dissatisfaction permeates through the entire customer journey, particularly across product offerings, onboarding, servicing and claims/surrenders,” says the report.
LEGACY TECHNOLOGY
The report says the life insurance industry is struggling to meet customer experience expectations of today, with legacy technology being a major barrier to driving meaningful change. However, there is a small group of life insurers globally delivering quantifiably outstanding customer experience to achieve ‘best-in-class’ status, it states, adding: “In comparison to mainstream insurers, these innovative companies have been rewarded with a 38% higher Net Promoter Score, an 11% lower expense ratio, and a 6% higher revenue growth than the rest of the industry in the last 3 years. The report points out customer pain-points as:
- At the onboarding stage, 1in 3 (35%) retail policyholders struggle with complex terms and 27% do not like the lengthy application process.
- After purchasing a policy, 1 in 4 (25%) retail and group customers express frustration over long wait times, while 23% are frustrated by the inability to access self-service options for policy changes.
- The claims process too have challenges, primarily due to a lack of digitization: 1 in 3 (35%) retail policyholders say they face a complicated claim application process, with 27% noting a lack of empathy during the claims experience.
MORE FRUSTRATED
One crucial aspect brought out in the report is that younger policyholders (in the 18-40 age group) are more frustrated by a challenging experience than older customers (in the 41-60 age group) throughout their insurance journey. The frustrations are often over slow and complex onboarding processes, lack of dedicated communication channels, and an inability to self-service policies. The younger lot call for greater claims flexibility, with 42% citing inflexible payouts as a critical concern, against only 26% of older customers.
The report says: “Despite a desire to redesign the onboarding, service and claims experience, only 9% of carriers have established ecosystem-wide processes that capture data from multiple sources to create a unique view of customers, and in turn, deliver personalized experiences through policyholders’ preferred channels.”
It notes that insurance companies recognize an urgent need to modernize their operations. But, only 41% met or exceeded their latest transformation goals, while past transformation initiatives fell short of delivering the intended results as many prioritized multiple goals which hindered their efforts. “The challenges were further complicated by unexpected integration complexities (50%), lack of alignment with business objectives (42%) and insufficient skilled resources (42%),” the report adds.
ELITE GROUP
In spite of this unhealthy scenario, the report found an ‘elite group of 5% of best-in-class insurers’ who are delivering a superior CX. They lean into the latest technologies, like GenAI, to offer exceptional onboarding, self-service and claims capabilities, it says. The report found that:
- 78% of best-in-class insurers have automated underwriting compared to 15% of mainstream insurers to optimize onboarding efforts;
- 78% offer self-service portals to policyholders compared to only 13% of mainstream carriers;
- 56% provide a seamless and intelligent claims experience through AI assistance for voice and sentiment analysis versus only 3% of mainstream insurers
The report emphasizes that the transformative potential of generative AI is undeniable for the life insurance industry, but there is a pressing talent challenge. “Today, 67% of best-in-class insurers are technically ready to leverage and maximize generative AI’s capabilities across their operations, with readiness levels dropping to 25% for mainstream insurers. Generative AI, when augmented with human intelligence, can revolutionize the consumer experience, while simultaneously driving operational efficiencies. However, one-in-three executives (34%) highlight identifying talent as a significant obstacle hindering their ability, with critical gaps in roles such as behavioral scientists, experience designers, and AI prompt engineers,” the report says.
It also stresses that success will hinge not only on the implementation of the technology, but also on the insurers’ ability to attract, develop, and retain the right talent. “Carriers who can effectively blend cutting edge technology with skilled professionals will be well-positioned to lead the industry into a new era of innovation and customer-centricity,” concludes the report.
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